SABC on its Annual Performance Plan; SABC Board Inquiry recommendations

Meeting report

The Chairperson welcomed the SABC Interim Board and noted apologies from the Minister and Deputy Minister of Communications.

SABC 2017 Annual Performance Plan presentation
Ms Khanyisile Kweyama, SABC’s Interim Board chairperson, introduced her delegation which included Mr Mathatha Tsedu, deputy chairperson of the Interim Board, Ms Febe Potgieter-Gqubule Interim Board member, Mr John Mattison Interim Board member and Mr James Aguma, Acting Group Chief Executive Office (GCEO) of the SABC.

Ms Kweyama stated that they were there to give a presentation of the corporate plan and to give a progress report of what the Executive and Parliament had set them to do. As the SABC, they are committed to their mandate which is to play a role as a broadcaster which serves the information, educational and entertainment needs of audiences in the country. It entails looking at programming in the diverse languages of South Africa irrespective of where people are located be it urban, rural or peri-urban settings. The SABC as far as its public mandate is concerned, in the last year exceeded its mandate in its public service for both radio and television and they expect to do so in 2017.

Eighty percent of the content is produced locally as we speak and the African language radio stations are quite good flagships that they can be proud of. However, at the end of 2016 the SABC found itself in a crisis, the reason for that is a decline in revenue and an increase in expenses. Looking forward to the next three years, the SABC will have to embrace and manage various forecasted local and global socio-economic factors, the funding of the Corporation, costs of licencing and broadcasting are becoming more challenging, matters around sport rights as well as the competition from pay television broadcasters. Nonetheless, the SABC will continue to prioritise sports of national importance as it understands the pivotal role sport plays in nation-building, social cohesion and creating role models for the youth.

The successes as the SABC are quite dependent on the continued commitment of the employees and key stakeholders such as the Committee. She thanked the Committee for the interactions via correspondence, visits to Johannesburg and the support they have given the SABC. In the absence of the minister, she thanked the shareholder for her unwavering support. She invited Mr Aguma to begin the presentation.

Mr James Aguma, SABC Acting Group Chief Executive Office (GCEO) noted the briefing would cover background of the SABC, 2017/18 strategies, Year One which is business as usual, 2017/18 – 2019/20 budget, 2017/18 – 2019/20 predetermined objectives, implementation of the SABC Board Inquiry Report recommendations, work currently under way and finally, the work beyond the Report recommendations.

He said that, as Ms Kweyama stated, the SABC remains the only broadcaster serving the information, educational and entertainment needs of millions of citizens and the ability to provide content in all official languages. Although the presentation mainly deals with the three-year Corporate Plan, it is underpinned by the internal dynamics facing the SABC and the expectation that the Interim Board will provide a progress report on the implementation of recommendations contained in the final report of the Ad-Hoc Committee.

The SABC operates in the context of one of the most rapidly changing business environments in the world. The global media sector is experiencing fundamental changes due to the growth of digital technology and the convergence of media, technology and telecommunications as well as changing media consumption. The impact of these changes is changing the consumption patterns of content and increasing competition as different platforms evolve.

The SABC also operates in a developing South African economy which has felt the impacts of a global slowdown, and is susceptible to foreign exchange fluctuations which have a significant impact on its core business. This has an effect on the amount of revenue and the amount of TV licences that they collect.

The slower than anticipated economic growth rate, job creation and growing inflation all contribute to a slowdown in advertising spend, while the depreciation of the currency dramatically increases the cost of international content and sports rights. 76% of the revenue at the SABC comes from advertising, 5% comes from sponsorship which means that 81% arises from advertising and sponsorship, so any shock in those areas affects the SABC.

The costs of licencing and broadcasting the extensive list of sports of national interest, will become even more challenging over the coming years. The cost of sports rights will continue to grow exponentially, driven by the need of pay-television companies to retain subscribers in the face of competition from video-on-demand and piracy.

In terms of the internal dynamics, the strategies, decisions and events that impacted on the internal dynamics of the Corporation and need to be considered as part of the Corporate Plan included: The increase in local content quotas on Radio and Television – local music quotas were increased to a 90/10 dispensation on all Public Broadcasting Service (PBS) and Public Commercial Service (PCS) radio stations. The SABC 3 local content quota was increased to a 80/20 split. These decisions resulted in a loss of audiences and revenue.

The big losers were commercial and flagship radio stations Metro FM‚ 5FM and Good Hope FM‚ in addition to television channel SABC 3‚ which all showed a decline in audience. In addition, changes in the manner in which content for television is procured – the previous Request For Proposals (RFP) process proved to be extremely cumbersome and protracted resulting in competing broadcasters implementing content strategies before the SABC’s process has been finalised. Amounts ring-fenced for content commissioning as part of the RFP process, were utilised to licence or procure other local content offerings.

SABC’s involvement in a number of legal matters and litigation cases has had financial and reputational consequences for the Corporation. They found that the reputational consequences have had a direct impact on the attitude of TV licence payers and to a certain extent, even advertisers, are a bit coy to increase their advertising space.

Mr Aguma said that they also want to highlight the appointment of consultants, specifically in the Finance Division, to assist the SABC in clearing the Auditor-General (AG) findings of prior years. Leadership instability with SABC Board members either being removed from the Board or resigning leading to the Board finally being dissolved has also impacted on the internal dynamics of the Corporation. The consistent negative reporting by the media on events at the SABC has ultimately resulted in decreased revenue collection, reputational damage and staff morale.

The SABC focuses on four strategic pillars:
- financial stability, they aim to be a financially sustainable organisation
- content and platforms, they seek to acquire and schedule compelling and quality programming, spanning a range of genres, in all official South African languages, and exceeding mandate objectives across traditional and digital media platforms
- human resources, they aim to develop a dynamic and motivated fit-for-purpose workforce that embraces learning and is sufficiently adaptable to migrate into the digital age
- governance, they aim to ensure compliant governance practices complemented by effective risk management and an internal control framework.

▪ Financial sustainability is divided into four sub-objectives:
- a diversified funding model
- a cost containment measure on a fixed cost base
- reinvestment of profits in line with mandate requirements
- ensuring positive liquidity status.

They would like to highlight the diversified funding model because the SABC is unique in that it has a public mandate and it operates in a commercial environment. So the cost of the public mandate has to be funded out of the commercial revenue and with such, there is a mismatch in funding the public mandate and the source of those funds. 85% of their revenue comes from commercial services and they find that there is a gap in public mandate funding, so they need to get funding from public interest sources.

Since profits earned from the SABC commercial ventures are reinvested in achieving its public service mandate, growing profit is not the SABC's key objective. Rather, it is focused on ensuring the Corporation maintains liquidity and is continually able to fund its mandate. So for them, in a year when they already know that the cost of the mandate is going to be higher than the revenue, it cuts profitability objectives. In that area, it is very difficult to attract revenue to at least cover the mandate.

The SABC is currently funded from a number of sources: Public funding (television licence fees) – 11%; Advertising Revenue 76%, Sponsorships 5%, Other revenue 5% and less than 3% Government funding (primarily for educational programmes).

In achieving its goal of being a financially sustainable organisation, the SABC also takes cognisance of the Presidential Review Committee (PRC) on State-owned Entities (SOEs) report. The PRC made 31 recommendations on the future of SOEs. The recommendations of the PRC are wide ranging and include some notable interventions. Of particular importance to the SABC are the following: Profit and non-profit objectives of SOEs must be clearly defined. The principle embodies the unique nature of SOEs, embracing their need to service social objectives. These objectives should be clearly defined articulating trade-offs between profit and non-profit objectives. The primary and core mandate of entities and their viability should be prioritised.

Government should ensure consolidation of the SOEs. Clustering and centralising should be in the following groupings: commercial; development finance institutions; statutory corporations; non-commercial SOE

The rationale for commercial SOEs (under which the SABC could be categorised) is their ability to command market-related revenues, having a bankable balance sheet, the ability to post profits and the ability to maintain and replenish market capitalisation autonomously from the State. In cases where the State requires these entities to undertake non-commercial mandates, then the State should contract and fund them for these mandates. They feel there are certain mandates such as sports and events of national interest that are not being funded which is having a severe impact on SABC’s ability to balance expenses.

Government should develop a consolidated funding model for commercial SOEs and DFIs (development finance institutions). Private sector participation in partnering with SOEs to deliver on the provision of both economic and social infrastructure should be encouraged and expanded.

▪ Content and platforms is divided into three sub-objectives:
- distinctive and quality local content accessible on multiple platforms delivered through strategic and sustainable partnerships
- ensuring audience dominance
- attaining technology and infrastructure to support the changing broadcasting landscape.

▪ Human Resources is divided into three sub-objectives.
- attracting and retaining talent
- introducing a high performance culture
- recognising learning and development.

▪ Governance
- focusing on enterprise-wide risk management
- establishing internal control environment.

He proceeded to the slide on Business As Usual which focuses on the key issues that they are addressing. The SABC financial crisis has given rise to the need of a capital injection to stabilise the organisation. The Minister has established a financial task team to put together a request for funding which will be presented to National Treasury in due course. Over the past three weeks the Interim Board has been seized with putting together this funding request. Reasons for revenue underperformance can be attributed to these key factors:
• Flat-lined advertising spend by both local and multi-national clients;
• 90/10 local music quotas which had an impact of R29m on radio and R183m on television (unaudited);
• Revenue generated from television licence fees has been on a regressive trend the past three years;
• Increasing costs of sports rights compounded by obligation to cover sport of national interest without funding from the fiscus;
• Government funding is ring-fenced to fund the operations of Channel Africa, XKFM and educational programme production. The 3% funding amounts to approximately R164m. The SABC requires more than R4 billion to deliver on mandate requirements alone.
• The cost to deliver on local content has grown significantly over the past years. However, funding did not meet the same growth levels.
• The SABC mandate to provide news and current affairs content to 18 radio stations, 3 terrestrial television channels, one dedicated satellite channel and digital media. Total cost for news and current affairs over the past three financial years ranged from R647m to R745m per annum
• National events such as the national and local government elections are unfunded mandates which impact directly on the financial position of the Corporation. The expenditure for the 2014 and 2016 general and local elections were R39m each on average.
• Covering unplanned events of national importance such as funerals is on average R37m per annum.

The SABC has identified high level strategies as the cash crisis confronting the SABC demands both immediate interventions and strategic adjustments. The immediate steps are to deal effectively with monthly operating costs exceeding available cash flow. The strategic adjustments are to ensure the SABC regains financial sustainability. The quick win strategic interventions identified include reviewing and amending the Television Licence Collection Agreement, currently at 35% of collection target). They would like to review and amend local content quotas for identified SABC radio stations and television channels. They would also like to phase out an additional early settlement incentive for advertising clients.

The SABC has also identified the following turnaround strategies:
• Restoring the SABC’s liquidity status to that of a sustainable concern.
• Defining a viable operating and business model that is efficient and yet supports the delivery of the SABC mandate and strategy.
• Restoring the integrity and brand reputation of the SABC.
• Implementing platform and channel strategies informed and driven by audience needs and increasing and/or maintaining audience share across all platforms.
• Increasing revenue through effective and efficient collection of licence fees.
• Increasing the SABC share of advertising spend.
• Identifying wastage and implementing cost cutting measures to improve the SABC financial position.
• Improving procurement effectiveness.
• Preparing for the migration to Digital Terrestrial Transmission (DTT).
• Putting in place innovative and cost effective technology platforms and infrastructure that facilitate multi-platform content delivery and universal access.
• Involving the public in defining the SABC Editorial Code through the review of editorial policies in line with legislative requirements.
• Addressing losses and inefficiencies in acquiring sports content.
• Aligning planning and reporting to comply with stakeholder reporting cycles.
• Right-sizing and right-skilling the organisation.

As a part of their high level strategies, they will also be looking into various revenue initiatives which include:
• Aggressive exploitation of advertising revenue from digital media platforms;
• Content and Rights exploitation
• Content distribution platforms
• Changes to the Broadcasting Act to increase revenue from television licences.
• Review of ICASA regulations for sponsorship of news;
• Optimising the TV licence fee collection as a revenue stream.

Mr Aguma noted that various items were not included in the budget. It does not include the potential software licence costs estimated at R173 million because the matter is still subject to further negotiations and possible litigation. The budget does not include the potential revenue losses on the expected ban on alcohol and fast food advertising, this because the SABC has submitted its comments and cannot quantify the revenue losses until such time that the impact of the legislation is finalised. Further, the budget does not include foreign exchange gains and losses, as well as the launching of additional DTT channels.

Mr Aguma said that the SABC has prepared a break-even budget for 2017/18. The key issues for the 2017/18 budget are: In terms of commercial revenues - the SABC remains committed to providing its clients with unparalleled reach, a unique audience mix, cost-effective media platforms, unmatched value proposition through strong brands and sought after on-air personalities. Commercial revenues do, however, remain hampered by a number of factors within the industry, including but not limited to: changing or uncertain technological and regulatory environment, increased competition through the arrival of free-to-air DTH platforms and a constrained macro-economic outlook resulting in a reduction of advertising spend.

TV licence revenues have been budgeted at R1.055 billion for 2017/18. This is despite the poor economic outlook, an ageing debtors’ book and a lack of annual tariff increases. There remain internal efficiencies which can be unlocked and yield higher revenues.

The other key budget points include the fact that programme, film and sports rights have received budget increases to support the initiatives to grow audiences and to ensure delivery of quality local content. Broadcast costs include various initiatives to increase the programme quality and content within radio.

Other operational expenses are budgeted at R600 million. The main cost drivers are the maintenance costs that are required in line with the ageing building infrastructure at the SABC. Other significant cost drivers are energy costs, software maintenance and upgrade contracts.

Professional and consulting fees include audit fees, legal fees (mostly for litigation) and various other initiatives including finance support to address audit findings. External services are utilised for these initiatives only in cases where there are no internal resources or skills available. However, the budget for future periods decreases on the assumption that the SABC will utilise fewer consultants going forward.

Progress Report on Implementation of Recommendations of Ad Hoc Committee Final Report
Ms Kwayema noted that the final report of the Parliamentary Ad Hoc Committee on the SABC Board Inquiry into the fitness of the SABC Board was adopted by the National Assembly in March 2017. The Committee found that the Board had for some time prior to its collapse, failed to discharge its fiduciary duties, adhere to the Board charter and carry out its duties as contemplated in Section 13(1) of the Broadcasting Act. The final report contained 33 recommendations – 24 to be implemented by the Interim Board and nine by Parliament. She outlined the 24 recommendations to be implemented by the Interim Board and the actions taken:

1. Investigate the validity of MOI signed in October 2014 and recommend amendments to align it to the Broadcasting Act.
2. The Company Secretary should ensure that members of the Interim Board are inducted within a reasonable time.
3. Ensure the Board takes reasonable steps to regularise previous decisions that may pose a financial or legal risk.
4. Establish board sub-committees
5. Initiate disciplinary action against any official who made and permitted irregular, fruitless and wasteful expenditure according to section 51(e)(iii) of the PFMA.
6. Institute an independent forensic investigation into questionable and irregularly-awarded contracts.
7. Evaluate the feasibility of entering into agreements with rival broadcasters: ANN7 / MultiChoice (DSTV).
8. Take appropriate action against current and former employees and board members who are found to have been complicit in the SABC incurring wasteful expenditure as a result of irregular activities.
9. Submit a progress report to Parliament.
10. Fill top executive positions with suitably qualified people. So far a decision has been taken to expedite permanent filling of the positions of GCEO, COO, CFO, Group Executive Radio and Chief Audit Executive. 11. Enter into performance agreements with employees within 60 days.
12. Start the process of appointing a new Company Secretary.
13. Ensure that all legal costs incurred as a result of the court challenge by the previous SABC Chairperson in his personal capacity is recovered as per court order. The Interim Board has been advised that in terms of the Companies Act, the SABC has indemnity insurance covering its Directors / Officers and that the legal costs of the previous Chairperson were paid by the insurance and not the SABC.
14. Ensure that all senior management appointees are vetted by the State Security Agency (SSA).
15. Review human resource policies to ensure compliance with legislation.
16. Investigate the nature of SSA’s activities within the SABC.
17. Perform an audit of all remedial action, recommendations and orders that have been issued over the last three years to determine SABC’s compliance in this regard.
18. Evaluate the financial and legal implications of unilateral changes to policies.
19. Implement the Public Protector’s remedial action outlined in ‘’When Governance and Ethics Fail” Report.
20. Adhere to the highest standards of journalism with editorial independence being of most importance.
21. Restore public confidence in its reporting on current affairs, entertainment and educational programmes.
22. Seek to recover revenue lost as a result of inadequate editorial policies.
23. Ensure an environment free of fear and intimidation or abuse of power. In conjunction with Minister, they seek to implement action against Acting GCOO for having defied Parliament. Further, they seek to investigate the former Company Secretary’s conduct and if necessary charge her in terms of Section 17(2)(e) of the Privileges Act.
24. Ensure that the attorneys and the company secretary should face appropriate consequences for denying Parliament access to documents.

In terms of the work that is currently underway, in view of the SABC’s financial crisis the Board, has been in consultation with the Shareholder and a process to source funding is underway. With the assistance of the Shareholder, the Board established a Task Team to work on a Funding Proposal that addresses a Turnaround Strategy for the Corporation. The Board has approved the Funding Proposal, which has been sent to the Shareholder. Details contained in the funding proposal have been included in the presentation.

In order to manage payment of creditors and service providers, the Board has established a Task Team to approve commission of contracts and prioritising of payments to these third parties.

There are continual consultations with staff and stakeholders regarding the status of the Corporation and to build public confidence. The Board will be visiting the SABC provincial offices to interact with staff and listen to staff issues and assure them of an intimidation-free environment. The Board has already met with staff at the SABC head office on two occasions, ICASA and independent producers’ organisations

Through the Shareholder, the Board has requested the withdrawal of the 2017/18 to 2019/20 Corporate Plan that had been submitted by Management in the absence of the Board. During induction, the Board considered the Corporate Plan taking into account the current financial status of the SABC and observed that the document was not reflective of the SABC’s financial crisis, the internal dynamics contributing to the manner in which the SABC operates and how these will be dealt. Further, it contained unrealistic budgets.

Together with Management, the Board worked on a revised Corporate Plan, which has been approved by the Board and submitted to the Shareholder.

In an endeavour to strengthen the corporate governance and financial management framework of the SABC, the Interim Board has deliberated and approved proposals and courses of action which include the approval of the Terms of Reference for 2017/18 of all the board sub-committees

The Audit and Risk board committee assists the Board in discharging its responsibilities on the integrity of the Corporation’s financial statements, the effectiveness of the systems of governance, risk management, internal control and monitoring the effectiveness and objectivity of the internal and external auditors. The Board has approved the cancellation of the contract with LornaVision to collect TV licence fees and has subjected the contract to a forensic audit by the SIU. The Board has approved that the contract with Sekela Xabiso (to assist with clearing of audit findings) and the contract with Vision View to construct the multi-purpose studio be referred to the SIU for forensic audit.

Ms Kweyama said that the Board has a Finance Investment Procurement and Technology committee. Its purpose is to advise the Board on financing activities, investment policies and procurement policies and processes and to ensure that the Corporation employs innovative technology and information systems to enable the SABC to deliver on its public broadcasting mandate. Its duties include oversight on the activities of the Group Bid Adjudication Committee and receive periodic feedback and reports on the activities of the committee from its chairperson and review the Group Bid Adjudication Committee’s submissions to the Board as approved by Group EXCO and make recommendations.

The purpose of the Human Resources Governance and Nominations board committee is to ensure that the structure, size, composition, skill sets and performance of the Corporation is regularly reviewed and maintained at levels which are appropriate, the implementation of Performance Management across the Corporation, appropriate succession planning, monitor the extent to which Human Resources practices and conditions of employment are being adhered to; and evaluate succession-planning arrangements for Group Executives, to ensure that these are orderly and calculated to maintain an appropriate balance of diversity, skills, knowledge and experience. The committee recommends to the Board and subject to the approval of the Minister, determine the remuneration for the Executive Directors, on appointment, having regard to the remuneration policy.

There is a joint PBS/PCS board committee. In terms of the PBS, its assists the Board in setting the editorial policies of the Corporation, ensure the editorial integrity of news and current affairs programming, ensure that the SABC produces accessible, accurate compelling, professional and authoritative news, current affairs and other programming that is fair, balanced and in line with its editorial policies and the regulations. It defends the editorial independence of the News Division and encourages the pursuit of excellence.

With regards to the PCS committee, it ensures that the SABC delivers on its obligations as provided for in the Public Broadcasting Service Charter. She said that the committee is seized with reconsidering the directive of 90/10 and 80/20 local content on radio and TV respectively and will make a proposal to the Board at its next meeting.

The Social and Ethics board committee assists the Board to monitor/oversee the Corporation’s activities, having regard to any relevant legislation, other legal requirements, or prevailing codes of best practice, with regard to social, ethics, and transformation responsibilities. The scope of the committee extends to the SABC Foundation in ensuring the necessary oversight within the legislative and regulatory framework that governs the SABC Board.

Ms Kweyama stated that her deputy chairperson advised her to close the presentation there. She stated that the Board’s work is continuing in spite of the tight time frame. Boards usually meet once a quarter, yet this board does not have the luxury to meet once every six months, so they have been meeting regularly particularly monthly or sometimes twice a month. They meet regularly as board committees and as the board, to ensure that decisions are processed properly.  

Discussion
Mr M Gungubele (ANC) expressed his appreciation on the steps taken by the board in reaching the 24 recommendations. He asked Mr Aguma about financial sustainability, seeing that in the presentation it was stated that profit is not the SABC’s objective yet they use profit. He does not find alignment in those two. If there is a possibility of making a profit and reinvesting it, why is it not an important point and if there is use for it, why is it a lesser objective?  He said the performance plan stated as a performance indicator: to achieve an annual profit before tax. He asked why only before tax. If they were interested in getting a profit, they would not be focused on the “before tax”. Is this the continuance of the unimportance of profit?

He is worried that in the performance plan, there are no baselines. He would like to have means to monitor performance, even of key personnel like Mr Aguma himself in order to keep track of what has been achieved performance wise or what changes have been made. At this point, they do not know what baseline Mr Aguma is moving from and therefore they will not know whether anything has improved. He asked, when they say “financial sustainability”, what is the status now in specific terms? When they state “embrace diversity of programming”, what is the status now? It all goes back to establishing baselines.

Ms N Tolashe (ANC) welcomed a well-explained and clear presentation by the chairperson of the Interim Board. She is very impressed with the board and how the chairperson of the board is making brave decisions. It could have been worse. The fact that the Interim Board chairperson took the decision to rescind the process of taking the SABC Board Inquiry Report to court was very brave.

She congratulated the board on how they have aligned the kind of work they are supposed to do with the implementation of the Public Protector Report, the implementation of the SABC Board Inquiry Report recommendations and ensuring that they take into consideration the Committee Report they got when they visited the SABC, which they were also part of.

She said that she still cannot believe that at the dawn of democracy certain practices still exist, as she is constantly being told that the SABC is a national key point, but what she saw at the SABC was an environment that was a military base. Dealing with changing that environment is important, and in dealing with staff members, they need to take staff for counselling. On their visits, they met women who were well-articulated and highly educated and they heard stories that they were abused on a daily basis as women. If the allegations are true, people were under surveillance. As much as the board is tasked with a lot, they need to attend to improving morale because people from the SABC were negatively impacted by their experiences and were highly emotional.

The withdrawal of the previous 2017-20 Corporate Plan is a good decision and she asked who had submitted it. There should be action against those people. As we move forward, we are teaching people how to conduct themselves professionally. She is happy to hear about a high level strategy dealing with SOEs, but she would like to see time frames. For example, by 2020 will they be out of the woods?

Ms Van Damme thanked the chairperson and echoed Ms Tolashe’s welcoming of the Interim Board and thanked the Interim Board for signing up to national service and signing up to this task. She stated that a lot of people consider the SABC board as a poisoned chalice and steer away from it so she was thankful that they accepted fixing the complete collapse of governance at the SABC.

Based on the presentation, it seems that they achieved a lot in a short space of time. She asked, seeing that they had submitted a funding proposal to the shareholder in the last few hours, how much had they requested to keep the SABC afloat and what is the approval process? Does the shareholder approve it or submit it to National Treasury?

She said that she was glad to see that the recommendation on the Editorial Policy was being implemented. As it stands now, is the revised Editorial Policy withdrawn and is the previous one in place?

She thought that the board was misled about the former chairperson’s litigation because in the presentation they had said it was paid for from the SABC’s insurance. During the court case the Advocate for Mr Maguvhe said the costs were in his personal capacity. So however gave them that information misled them and that person needs to be brought to task.

Ms Van Damme said she is glad that they seized the issue of intimidation and low morale at the SABC especially because journalists were shot at and their houses were broken into. Quite frankly, it does not take a rocket scientist to figure out where those attacks were coming from. The break-in at the SABC offices in Parliament, is that being investigated?

She said to Mr Aguma that it is strange the he is presenting the SABC’s finances as if he was not directly involved in playing a part in causing the problem. He was talking about the 90% local policy complaining that R200 million is lost as if he was not part of the team that drew up the policy. As a chartered accountant, he should have done the necessary research before the policy was implemented. In his presentation, he spoke of liquidation and how that impacted on finances yet he was in court sitting next to Hlaudi Motsoeneng when SABC money was being wasted on litigation, so he is personally responsible for the crisis in which the SABC finds itself. She would have liked for him to take a little personal responsibility. They have not paid artists and producers royalties and they have not paid artists for performing at the Thank You concert, so Mr Aguma is personally responsible and should take responsibility by resigning.

In terms of diversifying the funding model, she asked for more detail because that is what is needed to save the SABC. The SABC needs to find new ways of making money. With reference to the SABC cash reserves, what is the current status because last year the SABC plunged from R1 billion to R200 million?

She understands that the Interim Board has a lot of work ahead but she thinks that the matter of the Hlaudi Motsoeneng disciplinary inquiry needs to be resolved. The court had said that it should happen in two weeks, but it has now been a month and half. Can they have a clear date as to when that will happen?

Mr R Tseli (ANC) expressed his appreciation for the work done by the board. He said that it shows there is light at the end of the tunnel. In terms of the readiness of the broadcaster to migrate, he asked how ready are they to migrate to digital terrestrial television (DTT)?

Secondly, in terms of the status on the ICASA-SABC court case, where are they now? What are the strategies to attend to collecting TV licence fees? He asked how the board committees are structured. Mr Aguma mentioned the unfunded mandates. What strategies do they have to attend to that particular issue?

In clearing the Auditor-General audit findings, he asked why they wanted to attend to 50% and not 100% of findings in 2017/8. In one financial year, can the SABC not attend to all the matters that the AG raised?

Ms V Van Dyk (DA) welcomed the board and congratulated them on the work done so far. She asked how do they intend to collect TV licence revenue and how will DTT impact on their collection model? Is there any estimate with regards to court costs as a result of Mr Hlaudi Motsoeneng’s involvement at the SABC?

She referred to Mr Aguma who spoke about the impact of negative reporting by the media on the internal dynamics of the SABC. She asked whether he thought the media reporting was false. The SABC is a public broadcaster and the media should be able to report independently.

Ms M Matshoba (ANC) was pleased with the Interim Board. She asked what the nine recommendations are that need to be implemented by Parliament. What are the measures for advertising the CEO and CFO posts and what is the time frame? She thanked the Interim Board for having consultations with staff in different provinces and listening to their issues and reassuring them. She said that in their visits it is also crucial to do this with the acting staff of the SABC.

Mr W Madisha (COPE) thanked the board for doing their best, for the first time they have received empirical evidence of the ongoing happenings at the SABC. The board has given the Committee these proposals, and they will look into each and every point they have outlined so that they can be able to move forward.

Mr Madisha asked if there are there no written contracts for the consultancy of a number of companies including ANN7 and Multichoice. If they exist, whose signature is on them?

He said to Mr Aguma that some journalists were put under surveillance by intelligence. Although Mr Aguma was still going to meet with the intelligence chief of the country, he asked who they allege to be responsible. They need to look into this unnecessary harassment of the people of the country. The board must follow up on the disappearance of the computers from the break-in, because it is not only happening at the SABC, it is in other sectors in the country which is extremely dangerous.

He asked what has happened about staff assessment. Are people working at the SABC without being assessed, how do they get extra money and bonuses? They have heard that people like Hlaudi Motsoeneng will get more than R30 million. On the matter of funerals, who said they must show all of them? Not all funerals are important. If the late President Mandela dies, yes, that is important and that needs to be shown by the broadcaster.  

Mr H Maxegwana (ANC) congratulated the Interim Board on what they had done in the last few months. Looking at the unaudited losses for the 90/10 content distribution, Mr Motsoeneng rallied a lot of individuals behind the 90% local content. He asked if they have a strategy to deal with that problem. He knows already that there are concerns about how the board has dealt with the matter. It is an issue that cuts across Portfolio Committees such as the Portfolio Committee on Arts and Culture and it needs to be handled carefully. He apologised for his late attendance.

Mr L Mbinda (PAC) said that he would not congratulate the board yet, but would rather express his appreciation because they have some systems in place to do the work but they have not yet started the work. He would only congratulate them when the Committee starts seeing the results. The way the board has levelled the playing field has created a conducive environment which needs to be commended. He was happy that the board committees are in place yet he was concerned that the board chairperson was heading two board committees on top of chairing the board. He understands that their structure is very lean because there are very few members but they do have capable people at the SABC who could assist the board. The board should focus on the HR related issues and focus on harmonising the working relations and addressing whether they have competent workers. The board should prioritise the employees.

The Chairperson asked who effected the change of the SABC company secretary because he recalls Theresa Geldenhuys being in that position and now Lindiwe Bayi occupies that position. He asked was that done before the Interim Board was established because he is concerned that they may have received someone that they did not choose themselves. He asked on what basis they effected the change to the company secretary.  He requested short, direct responses from the SABC delegation.

Ms Kwayema replied that the funding proposal had been submitted to the Minister of Communications within the last couple of hours. She thus asked for the Committee’s indulgence on the matter to not disclose what is in the proposal just yet seeing that this is a public platform and there is a possibility that the Minister had not seen it herself yet.

With regards to Mr Maguvhe’s litigation, she said that they had received the information from their own legal office but they will go back and check if they were properly advised

She would also like the Committee’s indulgence on the Mr Motsoeneng case. There was a 14 day directive to start the disciplinary hearing. However, after seven days they were no longer a board and then after seven days they became a board again [after Minister Dlodlo was appointed]. In that time, they were not able to do anything and they were powerless to review any documents.

Furthermore, as the board, they wanted to do their own investigation and not merely accept everything that was drawn up in the charge sheet. They wanted to ensure that the charge sheet was drawn up properly and that everything that was in the judgement was included. She added that the board used their own independent legal counsel to go through everything and give them advice. The date of the hearing for the matter is 17 May.

On the advertising of posts, they identified the CEO, COO and the Head of Radio as the first layer; they do not want to flood the pages of Sunday Times with the advertising. They thought to go through appointments level by level. The company secretary was appointed before the Interim Board’s time. When they arrived she was already appointed. When they went through the minutes they found that she was appointed on 19 August 2016 when the previous board was still there so they had inherited her.

In terms of the transcripts and the secret service, they have been provided with transcripts of who had been surveilled and they have not seen any journalists in the transcripts. The people in the transcripts were people in the supply chain but they can re-look at the transcripts to make sure.

In terms of the board committees, the Interim Board merged some committees because of the small number of board members. The Audit and Risk Committee is chaired by Krish Naidoo and the members are Febe Potgieter-Gqubule and John Mattison. The Human Resources and Governance Committee is chaired by herself, and members are Mathatha Tsedu and John Mattison. The PBS and PCS Committees have been combined but John Mattison chairs the PBS and Febe Potgieter-Gqubule chairs the PCS and the member is Mathatha Tsedu, and there is cross pollination in those committees. The Social and Ethics Committee is chaired by Mathatha Tsedu, with herself, Krish Naidoo and the Acting CEO are on that Committee. The Safety Committee is chaired by herself and members include Mathatha Tsedu and Krish Naidoo. As the Interim Board, they each serve on the committees and chair on at least one of them.

Ms Febe Potgieter-Gqubule, SABC Interim Board member, expressed her gratitude to the Committee for their kind words of encouragement about the very difficult task they had been given. On Editorial Policy, given the deficiencies identified in the last editorial policy, the Interim Board made a decision to revert back to the 2004 policy. They will start a process of reviewing it which includes public participation. The review of the editorial policy is a way of reaching the broader South African public and part of the process of confidence building, as well as having a national debate about what a public broadcaster should be doing.

The board has seconded the decisions from the Audit and Risk board committee which recommended cancelling the LornaVison contract. The contract is supposed to come to end at the end of July and they are suggesting that a 30 day notice be given, which is provided for in the contract. They are awaiting clarification from the legal department in order to take that process forward.

On the collection of TV licences, especially renewals and as well as those that are subscriptions, there is capacity within the SABC to do that. They have seen that the company has underperformed as much as 50% during the period that it has been contracted, so the feeling was to have that process done in-house. There are looking at legal advice with regards to that process. In addition, the licencing department has been requested to come up with a plan on how it can take over some of those elements, within the period of the 30 days notice.

On the local content policy and what the strategy is to reverse the losses, this is a complex issue and the approach to it should not be a simplistic one. What they asked management to do is look at the impact on different radio stations. It is known that audiences have dropped and revenue and commercial stations such as Good Hope, 5FM and Metro have suffered losses. They asked for a presentation from PBS to look at a strategy to reverse the losses and so that it is done systematically station by station.

She said that it is if course the public broadcaster’s responsibility to contribute towards that growth of the film, music and radio industry in the country because it an important part of the industrial policy of the country. However, it is not only broadcasting that is responsible for that. They believe that the SMME Department, DTI and the Department of Arts and Culture have a role to play. Therefore the question of local content has to look at all those complex issues.

The reality is that the financial sustainability of the SABC is part of the process of ensuring that you develop a local industry. If they look back at 2007/8 when the public entity went through a similar crisis, the remedy was to cut back on local content. This then led to a reversal of the local industry which took up until recently to recover. There should not be a cyclical pattern where you build up the local industry for five years, then you collapse it over the next five years, and then it is built up again. They need to look at how to consistently do that - which requires the assistance of other departments. They are looking at recommendations to the board and there will be comprehensive presentations by the board committee that she is co-chairing with Mr Mattison.

One of the issues proposed, seeing that musicians do not have insurance and lack a safety net in getting royalties, is putting schemes in place so there is a safety net which has been done in other sectors. On the question of timeframes, seeing that they are on week seven of the 24 weeks they have together as the Interim Board, they would like to tackle as many issues as they can. They do not want to hand over a number of issues left unfinished to the next board. They seek to handle as much as they can candidly, including the appointment of the CEO.

Mr John Mattison, SABC Interim Board member, replied about the TV licence collection and strategy, saying that the SABC has 164 people working in the TV licence department and yet they have outsourced the contract. The shortfall on the budget is R449 million which huge. Secondly, the contract outsourced renewals and anyone in this room should know that you cannot outsource renewals, so they are confident that the contract cannot stand. It needs to be legally and correctly terminated. Speaking of strategy, the first strategy is to keep it in-house. The SABC has many good people working there in all departments, including the licence department so the board will hold their hands as they take over and meet with them once a month. He added that there are strategies for those who buy the TV licence just for DSTV but he does not think that it is the appropriate time to explain that just yet.

With regards to ICASA and local content, the decision on local content was not taken by the board and it was never planned. He was at ICASA in the 1990s when they started local content but they knew it would work because they had done the research and South Africa is a talented country. It created the growth of Kwaito, Gospel, Trevor Noah and Freshly Ground so all these things come out of getting that policy right. It contributes to local content and he agreed with Ms Febe Potgieter-Gqubule that artists are suffering.

To conclude on ICASA, how the local content action affected radio stations was to put them out of compliance because ICASA has licence conditions for every station. Radio Lotus, 5FM, Good Hope and Metro FM have been particularly affected by being pushed out of their format. If you have an adult contemporary station and you have to play 90% local, you lose audiences and revenue and you are also not compliant with the format expected. So obviously, they need to get them all back to their formats.

Mr Mathatha Tsedu, SABC Interim Board member, replied that DTT readiness all comes down to money. The majority of the OB trucks that do outside broadcasting are analogue so they need to replace those, it is that simple. They buy content in digital form but when they store it, it is in tapes because they do not have digital storage, so they buy something in 2017 content but have to store it in 2009-1980s format. When they eventually get money to get a digital library, they will take their 2017 content back all the way to the 1980s and whatever year they need to go back to. There is a need for a huge budget to help them to crossover.

The ICASA court case was around the ban of showing violent protests. ICASA said that decision was out of order and that the SABC needed to reverse that decision. The SABC did reverse that decision but did not inform ICASA that it had reversed the decision. In terms of ICASA rules, if it writes to you, you need to write back to say that you have complied. So the actions of that communication led ICASA to go to the police to lay a charge. The SABC has met with ICASA. There are still a few issues they need to fix but they have both agreed that it was water under the bridge.

Mr Tsedu explained the recommendations directed at Parliament dealt with the devolution of the board; how parliament could effect oversight over the SABC and how Parliament may have slacked on its own oversight; how certain individuals lied in Parliament and how that should be dealt with.

Mr Aguma replied that profits are important but because they have a public mandate and some of it is unfunded, so to monitor the profit figure would require them to cut expenditure and the most viable place to cut expenditure would be around content. So monitoring a profit figure would cut content and affect both costing and revenues. They use the term ‘profit before tax’ because there are certain adjustments in accounting standards that use a tax figure. To measure the actual achievement of the Corporation, it is better to use the figure before tax.

With regards to who submitted the discontinued corporate plan, they did not have a board and they did not know when Parliament would appoint an Interim Board so they took a decision to continue with the corporate plan and submit to the Minister, so they did that.

On the break-in, Mr Aguma said that he did not realise that they broke into Parliament. But with regards to the break-in, it is a police case so it is therefore beyond them.

On details on diversifying the funding model, he said that the question that they are dealing with is how they fund an SABC that has a public mandate. The majority of the funding is commercial sources but they have unfunded public mandates, one of which is sports, funerals and such matters. Commercial payments do not bridge that gap so funding should come from government.

In terms of the SABC cash reserves, he replied that he does not have the exact figures but it is in the region of R360 million to R400 million this month. Yesterday the balance was about R100 million in cash.

On unfunded mandates, he replied that digital presence is one of them, they have websites but they are not commercialised and not appealing to users to place adverts on them. But the MetroFM website is active, commercialised and there is a lot of interest, so they are looking to re-model at least seven a year.

On why they were only attending to 50% of the AG’s findings, Mr Aguma said that they decided to prioritise the systematic issues such as the qualifications. Certain policies need to change and systems need to be changed but they want to deal with the material issues first then go to the second layer which is the operational level. They cannot implement a 100% because some of it is impossible.

On how they collect TV licences in the digital arena, he replied that they notify people digitally such as via cell phone and ensure that they can pay on platforms that are digital. The SABC has done that and also implemented the ability for people to pay in instalments which could increase collectability.

In response to whether he thought that the media reporting about the SABC is false, Mr Aguma said that some reporting was true and some was not. Yet it still created a perception about the SABC which affects whether people decide to pay their TV licence.

In terms of staff assessment, they do not have a performance management system in place but he is hoping that the Interim Board will roll out assessments, rewards and so on. The board has committed to do that.

The Chairperson thanked the delegation for their input and stated that no more questions could be taken because they have a plenary sitting that day and there is no more time. On the company secretary, he stated that he will follow up on that.

Ms Kweyama said that there was a question regarding what can Parliament do, and added that there are many areas that they need clarification on and they need to be briefed by the Committee as to what is expected of the Interim Board.

The meeting was adjourned.